Edmonton faces $1.5B capital funding budget shortfall — which is set to grow

The City of Edmonton doesn’t have enough money to maintain its existing infrastructure, let alone build anything new.

In a fiscal update on Tuesday at City Hall, administration said there is $1.5 billion capital funding shortfall.

The money goes towards grants, neighbourhood renewals, fleet replacements and also for debt finance infrastructure.

Edmonton isn’t unique in this struggle — the city said this is an issue many cities are struggling with in the years following the COVID-19 pandemic.

Five years ago, Edmonton paused increasing taxes — something thought to be necessary at the time when many households were dealing with financial struggles such as layoffs or business closures due to the global health emergency.

2:01 Edmonton passes 2021 budget with 0% tax increase

• Edmonton passes 2021 budget with 0% tax increase
• City of Edmonton considering deferring tax, utility collection: Iveson
• Edmonton looking at property tax, utility bill deferrals in light of COVID-19
• Should the 2020 property tax hike debate be re-opened in light of the fallout from COVID-19?
• How COVID-19 will result in lower municipal taxes in Edmonton
• City of Edmonton cuts taxes, programs to respond to COVID-19
• Edmonton mayor addresses property tax adjustments
• Edmonton mayor says few other alternatives to property tax increase
• City of Edmonton lays off hundreds; sets lower property tax
• Edmonton city council approves property tax increase for homeowners, decrease for business
• Edmonton mayor on property tax break for businesses and steady rate for homeowners
• Proposed Edmonton budget includes $64M in reductions but 0% tax levy increase
• What cuts would the City of Edmonton have to make to reach a 0% tax hike?

Previous Video

Next Video

But now, Mayor Amarjeet Sohi says decisions like that, made by previous councils, are coming back to bite the city now.

“They froze taxes, they reduced taxes, they left this council with a huge deficit in our day-to-day operations — underfunding of city services like snow removal, not caring much about social equity issues that we are trying to tackle here, or grant funding that we have increased to community organizations.”

“Neglect will catch up on you and that’s exactly what we see.”

Tweet This Click to share quote on Twitter: "Neglect will catch up on you and that's exactly what we see."

1:55 Former mayor, current candidates weigh in on Edmonton’s ballooning budget woes

City leaders say the solution isn’t as simple as just spending less, because that can end up costing more down the road.

“Fiscal responsibility isn’t just about keeping taxes low or repressing things because this is what you end up getting,” said Ward Anirniq councillor Erin Rutherford.

“You end up with deferred maintenance, deferred renewal, and then we have the deficit that we’re seeing today.

Get weekly money news

Get expert insights, Q&A on markets, housing, inflation, and personal finance information delivered to you every Saturday.

Sign up for weekly money newsletter Sign Up

By providing your email address, you have read and agree to Global News' Terms and Conditions and Privacy Policy.

“That hole was dug over years and years — probably decades — and we can’t get out of it in one fell swoop.”

Tweet This Click to share quote on Twitter: "That hole was dug over years and years — probably decades — and we can't get out of it in one fell swoop."

Rutherford said one of the long-term solutions the city has come up with is a Universal Renewal Fund. She explained it’s dedicated to things like neighbourhood renewal and road maintenance – which can’t be funded through loans or money from other levels of government.

“Renewal isn’t sexy. It’s a lot of behind-the-scenes stuff. So you need what we call pay-as-you-go funding, which means we need cash in hand to fix the things. That’s really hard to find unless you build up a piggy bank, so to say, of tax funding that is going straight to that purpose,” Rutherford said.

“It’s saying to the residents, ‘You know, I know we’re taxing you on this, this is what it’s going for. You know those potholes that you’re complaining about all the time? It’s because we’re actually not renewing at our ideal state.’ So to get there, we need to actually have this fund that, on an ongoing basis, will give us more cash in hand to do the work of maintaining our city.”

1:44 City of Edmonton explores avenues to address funding shortfall

Sohi said the city has reduced the operating budget by nearly $200 million but more still needs to be done.

The mayor said the city’s finances took a hit due to changes the province made to Municipal Sustainability Initiative (MSI) funding.

The program allocated more than $15.2 billion to Alberta communities when it was in place between 2007 and 2023. The provincial government replaced MSI with the Local Government Fiscal Framework (LGFF) in 2024-25.

“We are getting one-third of what we were getting before, and we had to make it up by raising taxes or deferring the repairs. So I think municipalities in Alberta do not get the kind of support that is necessary to continue to provide good quality public services,” Sohi said.

2:01 Edmonton city council approves 8.9% property tax increase in 2024

The Alberta government’s Municipal Affairs department said municipalities have the autonomy and accountability to manage their budgets, including their reserves, in a way that meets the needs of the communities and residents they serve.

“$179 million was provided to the city through the Local Government Fiscal Framework – an increase of more than 13 per cent from last year,” a statement from Minister Dan Williams said, adding the province also increased grants in place of taxes (GIPOT) to 75 per cent in the most recent budget, with plans to increase to 100 per cent next year.

“This will provide the city with roughly $28.6 million in funding this year, which is an increase of more than $10.5 million from last year. The City of Edmonton can use this increased funding to help advance their local priorities,” Williams said.

The province noted it has provided $1.6 billion to support Edmonton’s LRT expansion projects, $190 million for the expansions of Terwilliger Drive and Yellowhead Trail, and $106 million for downtown revitalization.

On top of the current Edmonton budget shortfall, the city expects to be another $1.8 billion short in the next budget cycle, making the gap $3.2 billion.

But that doesn’t mean the city can just stop maintaining its assets — if nothing is done, Rutherford said it could mean closing down facilities and selling off assets.

“If we do nothing, in 20 years we’ll have a huge proportion of our city assets in D and F condition, which means they’re basically at failure level, and we will have to shut down some of the most valuable assets that Edmontonians have come to love, right? Our recreation centres, our libraries, our transit service will get worse.

“We will start to see those failures in service across the system.”

Tweet This Click to share quote on Twitter: "We will start to see those failures in service across the system."

1:54 City of Edmonton environmental policies driving up capital budget costs

Rutherford said that means the City of Edmonton will be quite limited in what new builds it commits to in the next four-year budget cycle.

“Any growth projects need to very strategic on things like safety — so fire halls, police stations — things that create tax uplift and economic wellness, and things that have funding from other orders of government.”

Ultimately to tackle a billion-and-a-half-dollar gap, Edmonton taxpayers will be on the hook.