Yesterday, city administration released a report that estimates the expected costs and revenues the city’s recently approved ‘greenfields’ (i.e. new suburban developments) will generate over a 50-year term. These are called our ‘Urban Growth Areas’ and they are essentially the outer 3 corners of our city, and they are very large in scale.
It should come as no surprise that the numbers presented in this report are also very large in scale. To service these areas, developers are contributing a significant amount of money – $3.84 billion, in fact. In addition, the City will spend $1.4 billion in capital to build additional infrastructure to support these communities – things like fire stations, parks, roads and interchanges etc. In turn, tax revenues and utility fees generated by these developments help to recover some of these costs.
However, when we consider the full life cycle of this infrastructure and the delivery of city services to these growth areas, the model shows a revenue shortfall of $1.4 billion over the next 50 years.
In the past, we would have relied on the City’s non-residential growth (i.e. new industrial, business and commercial operations) to help absorb these kind of shortfalls. Today 50% of the city’s tax revenue comes from this non-residential base, even though it makes up just 26% of our total assessment pool (i.e. the number of taxpayers). This means that non-residential taxpayers are paying 2.5 to 3 times more per unit of assessment than residential. This raises two flags for me. First, relying on consistent non-residential growth is a bit of a gamble, especially in this economic climate. Plus, administration’s report shows that we would need an additional $8.3 billion in non-residential assessment growth – city-wide – in order to maintain the current ratio. As bullish as I am on Edmonton, this growth is likely not imminent. The second issue is that we are beginning to ask our business community to pay more and more for our residential growth. Is this fair? For businesses that are at the financial breaking point, I’m not sure increasing their burden of taxes is good economic development policy.
There is no question that many Edmontonians choose to live in these new growth areas because of the price point these communities offer. However, this leads us to another fundamental question: if we have to increase property taxes well above inflation to pay for this growth and make up the $1.4 billion shortfall, are we really making things more affordable?
So – how do we start to close this gap? It is easy for this topic to polarize us into pro-developer and anti-developer factions, or into downtown dwellers vs. suburbanites. This is not the debate I want to have.
Instead, I want to spark an open and objective conversation – one that will include industry and the public – to analyze how we pay for this growth. I will make this commitment publicly when Executive Committee meets next week. While we will inevitably talk about new or re-tooled revenue generating options, I also want to ensure we talk about other development costs we ask developers to incur and what we can do to reduce them. Collaboration is the only way we will get at the heart of this issue for the benefit of all Edmontonians.
Calgary has recently made changes to their development cost allocations and this has elevated public expectations for us to look this issue in the Edmonton and regional context.
This is a critical conversation happening in cities all across Canada; I intentionally use the word ‘critical’ because Edmonton is simply not financially sustainable under our current growth model. This is one of the reasons the Big City Mayors’ Caucus advocated so strongly for a new deal on infrastructure funding with federal government. It’s also the reason I am hoping that Edmonton can set a new kind of example (as we’re good at doing) for how thoughtful, evidence-based cooperation can set our cities on a more financially sustainable path.