[Update December 28, 2011: links to City's infrastructure budget page repaired. Also, City's full summary can be found here. Also, I had 5.38% but the increase was in fact 5.39% because of a rounding error on my end.]

Inclusive of drainage, waste and the tax increases, it will cost $178 more annually for an average household next year. I do realize this is a significant increase on a percentage basis, and is above the Consumer Price Index.

Information of the Utility rates can be found here. As Chair of Council’s Utility Committee I can speak to the year of work that went into understanding the elements driving these rates and rest assured they are justified. However, we are looking at whether there is a fairer way to charge for Waste than the current flat fee.

The tax increase itself was 5.39% in the final budget. 2.25% of this is specifically for priority infrastructure projects, such as financing the new Walterdale Bridge, land acquisition for Southeast to West LRT, and a new police station in the Northwest. The balance (3.14%) covers inflationary impacts plus a modest amount of new spending mainly for policing and crime prevention.

I do think the city can be more efficient with existing resources and I continue to work constructively with the City Manager and City Auditor to identify ways to streamline our business; most people don’t realize that our City Manager has helped trim over $100 million from a $1.88 billion dollar budget over the last three years through improved efficiencies.

I realize that we cannot continue to increase taxes beyond the rate of inflation indefinitely, but I also do not hear a lot of public support for reducing levels of civic service, nor do I hear support for deferring infrastructure investment.

Fundamentally, however, Edmonton has transitioned from a low cost place to do business 10 years ago to one of the most expensive places to do business in North America, mainly because of the higher cost of labour, but also because of higher material and energy costs. The City does business in this same market and that drives cost, which in turn drives fees and taxes.

The answer, of course, is not higher property taxes.

Rather, we need a new deal for municipalities. The City has roughly 5% of a typical family’s tax dollars, but we have well more than 5% of the responsibilities for services and infrastructure. We will continue to struggle until the existing tax dollars are reapportioned and/or until cities are given fairer tax tools.

In fact, I would like to see us move away from property tax, and instead focus on other revenue streams that grow with the economy and respond to income rather than taxing theoretical wealth via property tax, which is often highly regressive for those on fixed incomes.

Nevertheless, the City must move ahead, as we have with the 2012-2014 infrastructure budget. However, the $2.7 billion of planned infrastructure investment in 2012-2014 is down significantly from the $3.6 billion 2009-2011 budget, though it still accelerates work on neighbourhood street and sidewalk renewal and keeps moving on LRT.

We’ve been able to do more in recent years through borrowing (debt) and thanks to increased grants like the Municipal Sustainability Initiative (MSI).

However, MSI was initially to be $1.4 billion annually province-wide, Edmonton’s rightful share of which would be close to $400 million per year, even under a disadvantageous funding formula. However, the most we’ve ever been allocated is $260 million.

Unfourtunately, because of the provincial deficit, the MSI program has been scaled back, with our share falling to around $180 million per year. The provincial government did promise to restore the funds in future years and make up the shortfall down the road.

The province did allow us to ‘fast track’ that money by borrowing against it, so we’re still spending $260 million on MSI-funded projects, on the hope that we’ll be paid back later. This is some of the City’s borrowing I’m more nervous about.

The 2009-2011 budget saw significant borrowing approved, mainly for new rec centres. In the budget before that, borrowing was authorized for the South LRT. Debt, as in these noted cases, makes sense (just like a mortgage) to pay for certain projects that are of city-wide impact, when rates are low, and while costs are down. And we’ve needed it to keep building the city.

There absolutely are limits to how much the city can borrow, but we’re still a way from those limits, even with the 2012-2014 borrowing.

However, new arena construction and related projects will take us closer to those debt limits.

Ultimately, debt capacity won’t always be available, and the conditions won’t always be right to use it. In the long term, building our infrastructure will require more ongoing cash from provincial and federal partners. The upcoming provincial election is a good time to ask candidates for their views on predictable and sustained infrastructure support for cities.

Finally had a moment to post this old news: Yesterday City Council finalized our budget for next year. It is fairly consistent with administration’s proposal which I outlined in a previous post, with a couple of significant changes.

The 2% dedicated levy for neighbourhood reconstruction and maintenance was lowered to 1.5% for 2011 out to 2018 based on lower costs to do this work. The pace of work should not be affected by this. If inflation hits this program at more than 5% a year between now at 2018 we will have to either slow the work or raise that rate again.

The other major change were reductions of $10 million related to some cost control in human resources, $9 million of which I found and proposed in a motion that was passed unanimously, which corresponds to roughly a 1% reduction to the tax bill.

There were some other minor subtractions, such as delaying our census for a year, and additions like Sunday hours for all Edmonton Public Library branches and ongoing funding for Scona Pool that, taken together, tallied up to the final result.

A key point for me is that 3.4% of the 3.85% is for infrastructure. The aforementioned 1.5% for neighbourhood work, plus. another 1.9% is directly related to debt service payments for bridges, rec centres, and libraries.

This leaves 0.45% covering all other operating costs for the city – one quarter of the rate of inflation. Truthfully, Council did approve some stiffer hikes in user fees for recreation centres and transit, and we can’t do that every year. I resisted the transit fare hikes but concede that we are making significant investments in service and safety on transit which somewhat correspond to the fare hikes.

At the macro level, I am most pleased that Council seems to have turned a corner from how we used to do budgets – where Administration would bring forward a huge increase in the first draft and Council would hack it back down. This historical pattern led to a couple of games played by Council: one I call ‘budget battleship’ where we just hack a department that ‘feels’ fat and see whether we hit or miss fat, muscle or bone; the other is called ‘pin the tail on the budget’ where towards the end of debate a wholesale cut to the tax levy of 1-2% off the top is proposed with direction to the city manager to achieve it without service cuts.

These games on our part in turn led to corresponding odd behaviour from city administration, at least this is my impression. To deal with the slashing motions they would sometimes miraculously find other revenues to plug the hole. It was also widely suspected that Administration padded the draft budget to buffer the inevitable slashes. The third defensive tactic would be the occasional ‘Barney the Bear’ maneuver, wherein Administration would say that a cut to a department would result in the loss of a highly visible public service: Barney the Bear, for those of you who didn’t grow up hear in the ’80s, was the Police safety mascot who visited schoolchildren – he was first to go one year the when the EPS budget was facing cuts.

So, the point is, we seem to have moved constructively beyond these games. Now what we do is set a guideline and budget principles in the spring, which guides Administration’s work on the budget. So when they brought us 5% (2% for neighbourhoods, 1.9% for the infrastructure debt service, and 1.1% for everything else) it was in line with Council’s springtime direction. To get there they made $23.5 million in cuts and efficiencies, some of which will affect service marginally but at least we saw all this laid bare in the budget.

All of this progress is why I took exception to the suggestion of one of my colleagues that we could cut 3%, or $27 million, without affecting service. That would be a return to pin the tail on the budget and all the corresponding games played on both sides. Besides, I am very confident that you could not remove $27 million in expense from this budget without affecting service, partly because it would lead to Barney the Bear and partly because Admin already took out $23.5 million as I indicated.

So, is the city as lean as it could be? I don’t know. I want better benchmarking and performance indicators, and that’s under development, but I’m pretty sure that it’s leaner than it was four years ago, and we’re getting better cooperation from City Administration. I don’t want to undermine that with a budget machete, and neither did anyone else on council, which I believe is why that motion failed 12/1.

So, in more than 140 characters, that’s the story behind yesterday’s Twitter exchange (scroll down) which made the news.

The following ran in last week’s Edmonton Examiner as part of our monthly ‘Councillor Connection’ column. It is reproduced here for reference.

Last week Council established 2011 budget guidelines for City Administration to work towards.

As with last year, Council set a target for an overall tax increase of 5% for 2011.

I recognize that very few Edmontonians’ incomes will increase that much in 2011, and that tax increases that exceed inflation are especially difficult for those on fixed incomes.

I wish that municipalities in Alberta had access to other forms of taxation, (such as the sales taxes US cities have, or a dedicated portion of the income tax like Winnipeg gets), which would be far more progressive, and would reduce our over-reliance on property taxes. In this vein, we will be looking at whether there are some user fees that could be increased to support certain services rather than taxes.

I should stress that the main drivers in the proposed increase are infrastructure related.

The guideline includes a 2% charge dedicated specifically to investments in neighbourhood roads, curbs, and sidewalks. This would be the third year of 2% increases in a row for this program, which altogether will increase investment in neighbourhood reconstruction and preventive maintenance by more than $50 million annually.

At this rate we’ll be able to tackle the backlog of work in mature neighbourhoods within 10-20 years instead of 50-100, while also preventing newer neighbourhoods from falling into the same disrepair.

There are also debt service costs associated with the major road and bridge projects we see unfolding around us, as well as the new recreation centres. These payments alone are equivalent to almost a 3% tax increase.

There are other costs under pressure from the growth of the city – i.e. the more we spread out the less efficient our emergency services, waste and transportation systems become. These operating costs are rising faster than the tax revenue we get from new development.

In other words, continued sprawl is pushing costs, and in turn taxes, up.

On the bright side, previous years’ larger increases were  also driven by a combination of increased infrastructure spending and labour market pressure. With the economic slowdown we can anticipate a more moderate cost of labour for the city, and better pricing on infrastructure, which is why we’re eager to push ahead with more LRT.

[This post is back dated to appear in order and correspond to the time. It was posted for reference in July of 2010.]

Council’s budget deliberations in December of 2009 resulted in a 5% tax increase that came into effect for 2010. 2% of that was dedicated toward the fund established to fix sidewalks, curbs and roads our neighbourhoods. 2.1% went toward policing, and 0.9% went to all the rest of the tax-supported operations.

You can download a pdf of the Executive Summary of the Approved 2010 Operating Budget from the city which explains the city’s revenues and breakdown of expenditures.

Councillor Anderson and I submitted a formal Administrative Inquiry this morning on the issues affecting the future of the pool as well as the proper process for dealing with a decision of this nature. We should receive it back to Council’s Community Services Committee in a few weeks.

The text is as follows:

Inquiry: Future of Scona Pool

1. Please provide a written report detailing the business case behind the recommendation to cease operation of Scona Pool. In doing so please confirm:

• How the $80,000 in savings for 2009 closure was determined;
• Attendance trends and comparatives with other Southside pools;
• The gross and net financial projections for 2010 with continued operation;
• Whether the pool owned by EPSB, and if so what are the details of the city’s lease or operating agreement?

2. If the pool is in fact EPSB owned, could the facility be leased and operated independent of the City of Edmonton?

3. Under what financial or operating scenarios might the city’s continued participation be justified?

4. Would the normal process for proposing closure of a city pool involve providing the answers to these kinds of questions in a report to Community Services Committee, and seeking permission to proceed on that basis?

5. If the best course of action is indeed to cease operations, please explain what steps will be taken to accommodate the user groups. Please identify these groups and what consultation has occurred with them and would occur as part of the relocation efforts.

Council debated some significant revisions to the 2009 budget yesterday, which we needed to deal with before we establish the tax mill rates later this month. City revenues are down about $30 million because of slower building activity (resulting in lower permit fee revenue) and low interest rates on the cash we have in the bank.

Here are some highlights with my comments:

Approved:

• Limited cuts to early (5 am – 7 am) and late (9 pm – 11 pm) service hours at some leisure centres. Further details to follow.
• Cease city operation of Scona Pool (it belongs to the school board, so ultimate closure is their decision). I’m not altogether happy with how this came forward and have some more questions on this. I’ll write more later once I’ve collected some more background. I’m getting a lot of unhappy correspondence on this today.
• Restoration of $1 million for Family and Community Social Services that was being diverted to cover the deficit.
• Implementation of parking charges at Transit Park and Ride. The city’s still working out the details of when this will apply. Briefly, I support this move. There are substantial costs to maintain these lots and there is no such thing as free parking. Many of the users could use the bus or walk, others come from municipalities in the capital region other than Edmonton where they do not support transit operating costs through taxation.

Not approved:

• Transit peak hour service improvements; I voted for going ahead with these needed service improvements — Cllr. Sohi spoke movingly about the very real need for this for students, new Canadians, and those who cannot afford private automobiles. We’ll see about shifting existing resources around to deal with peak demand.
• A special tax related to the gap between the provincial education property tax and municipal tax, which we’ve used in the past, was not levied on business (link to Journal story). It would have been used to restore our Financial Stabilisation Reserve which we dipped into last year for our deficit, which is what it’s for. I supported not doing this in a year when many businesses are struggling. We’ll top up the reserve when city revenues recover.

What follows was a guest column Vue Weekly invited me to write about Council’s budget deliberations last December:

I was one of nine councilors who voted in favour of the final 2009 city budget and I appreciate the opportunity provided by Vue to explain why I voted as I did.

My vote was in support of the budget overall; the resulting tax increase is the most visible (that is, widely reported) part of the budget, but it is the result of all the additions and subtractions that make up the whole budget package.

First, though, I should offer a bit of background on the process. Last May city administration sought direction from council for what we call a “guideline” by which to prepare the budget. The instruction we gave was to bring us the cost of delivering the same services in 2009 as we were delivering in 2008.

Administration took this instruction and prepared estimates, and returned in October with the news that the cost of delivering the same level of services in 2009 as in 2008 would require a 10.4 per cent increase in taxes. This initial proposed budget contained no new initiatives, and was mainly driven by previous commitments and the general increasing cost of doing business.

As an example of previous commitments, there was 0.6 per cent for borrowing to pay for approved projects like the Quesnell Bridge rehab and Southwest rec centre. On the matter of the general cost of doing business, the city relies on the same market for labour as other employers, and that market is still tight, though this pressure should diminish in the coming years as the economy cools.

Energy costs were also high when the initial estimates were produced. During the course of the budget we were able to safely reduce our estimates for fuel by $9 million and by $2 million for natural gas, which together reduced the draw on the tax levy by 1.4 per cent. We got lucky this year. I mention this to illustrate the extent of the city’s vulnerability to energy price volatility.

Our administration was able to recost a number of other items as the economic situation became clearer: some changes were favourable as bids came in under estimates, while others like the fees we receive from development applications and investment income will decline.

Council then debated the revised estimates into December and made further changes. We ultimately subtracted a lot more from the revised budget than we added, and the largest addition by far was for more police officers, which was unanimously supported.

I should also note that I supported most of the cuts that brought us down to 7.3 per cent. There were additional cuts proposed, which did not get majority support of council, but these would have substantially reduced services to citizens or simply pushed tax increases into future years. Overall I believe the final adjustments to the operating budget were prudent.

There is, as always, work to do within the city in terms of reviewing current service levels and administration’s efficiency in delivering said levels of service. I am assigned to council’s Audit Committee this year and look forward to pushing for better performance measures and setting a firmer guideline prior to next year’s budget debates. We also retain an independent auditor and all branches within the city are regularly reviewed. I do not think it is fair to suggest that the city is not working to be more efficient, though this is a widely held perception.

Our deliberations this year also included a three year capital plan (buildings, roads, LRT, and other infrastructure). As approved, this is a $5 billion plan that includes three recreation centres, the beginnings of a north LRT to NAIT, significant investments in transit and roads, refurbishment of aging infrastructure, and more. It should be noted that there remains billions more in work that needs to be done in the coming years that was not funded.

On balance we are moving forward with infrastructure, which was what people called for loud and clear during the election. This will cost money this year and in future years, but this city continues to suffer from failing to invest in the ‘80s and ‘90s.

Council also faced a difficult decision on how to fund local neighbourhood infrastructure (sidewalks, curbs and gutters) renewal and maintenance, which has been grievously under funded for years. There was a proposal to borrow for this work, but because this program will go on for decades, it would become a treadmill of debt to run the program. Council chose, and I supported, including a 2 per cent increase directly dedicated to fixing crumbling neighbourhoods and preventing newer ones from deteriorating. It means a larger increase now, but over the period of this work citizens will pay 60 – 90 per cent less because there will be no interest.

This work in neighbourhoods and other investments in bridges and buildings should have been funded a decade ago, and would have been a lot cheaper, but with prices moderating we have to get building. And, indeed, these projects will create jobs here in the city.

I believe that in 10 years people will say council did the right thing by investing Edmontonians’ dollars in infrastructure and preserving the services they value.

Again, apologies for the hiatus. I have been, as you might expect, incredibly busy.

I was sworn in last week, and since have had the chance to participate in a public hearing, bring greetings to an arts group (FAVA) and a youth group (the City’s Youth Council). We’ve also had a number of informative briefings on pressing issues, like our city’s fiscal situation and the ongoing planning and coordination question unfolding in the larger Edmonton Region.

We’re finally getting through new-councillor orientation, so our days will be less filled with powerpoint presentations and veggie trays (one of which I am partial to, you may guess which). It bears mentioning, however, that I am profoundly impressed with the vast majority of the city’s staff whom I’ve met—the clerk’s office, the senior managers, the folks in the council services area, and all the others who keep city hall running—they seem a knowledgeable and committed bunch.

My office is coming together too. I’m adjusting slowly to the Windows environment, having never owned a PC before. Councillor Henderson is also a dyed-in-the-wool Mac user, and we’re both struggling a bit. On the plus side, my Blackberry is pretty amazing.

I’ll write in greater detail about the special initiatives the mayor has assigned me later, though I’ll note here that I’m excited to be leading the new Environmental Sustainability initiative in addition to joining Councillor Krushell in supporting the ongoing Youth and Next Gen initiatives. I’ve also been appointed to the Edmonton Public Library Board as well as the River Valley Alliance.

I’m told, and I’ve already seen some indication, that I’ll be quite busy for the next three years. This suits me fine as I work best when I’m kept busy.

“Life” is adjusting, though it will never be quite the same after this. Already people are recognizing me on the street, and though I was told to expect it and I am not surprised, it is a little odd to be known.

Web site revisions on the way… promise.