Our city’s infrastructure plays a big part in every Edmontonian's life. The capital budget is about building and maintaining a great city, including the parks, bridges, paths, roads, buildings and transit facilities that Edmontonians use every day.
We need to take care of the investments we’ve already made, while being strategic in funding new projects as we grow to a vibrant city of two million people.
I wrote about the difference between operating and capital budgetsand wanted to dig in a bit further on how the capital budget works and what we’ve funded. The total 4-year capital budget is $10.6 billion and includes more than 200 construction projects.
There are many ways that capital budgets are categorized. The first is growth versus renewal projects. Growth projects focus on building new inventory that is added to the city (like the new Coronation Park Sports and Recreation Centre), or adding new elements to existing infrastructure. Renewal projects focus on repairing and maintaining already existing assets such as road or facility renewal (like the Peter Hemingway Leisure Centre). To maximize budgets, renewal projects often include a certain ratio for enhancements or improvements that are more cost-effective when done as part of the renewal project. For example, the Peter Hemingway Leisure Centre is a renewal project, but during this work some growth elements are being incorporated such as adding a cold plunge pool, as well as upgrades to make the building more accessible.
The capital budget also includes several diverse funding sources including reserve transfers, tax-levies (pay-as-you-go), federal and provincial grants, and debt financing. Depending on the source this funding can be constrained or unconstrained. Constrained funding has to be used for a specific project or purpose while unconstrained can be used for any capital project that the city deems necessary. Flexible funding in the City’s capital budget has been reduced significantly.
For example, provincial funding through the Municipal Sustainability Initiative provided a peak per capita amount of $414 in 2010. The province’s new Local Government Fiscal Framework is projected to average $134 per capita over 2024-2026.
There are three places that the capital budget intersects with the tax-levy.
The first is what we call “operating impacts of capital” which are budgeted in the years once the capital is complete. This includes foreseeable operating costs (staff, utilities, and maintenance costs). For example, a capital cost could be building a recreation centre, then the “operating impact of capital” cost would be the costs to staff and operate the facility. Second is the debt servicing which currently makes up over 10% of the City’s operating budget (eg; debt servicing in 2024 for the downtown arena is $18.3 million). The last is the pay-as-you-go which is tax-levy amounts that are dedicated to capital projects such as neighborhood renewal and makes up a certain percentage of the total taxes collected in any given year.
Decades of underfunding the renewal of infrastructure means that $3.6 billion is needed to address the city’s aging infrastructure.
In this budget cycle (2023-2026) Council prioritized funding 58% of renewal to phase in addressing renewal needs as we cannot address the gap all at once. Reducing or stopping spending on renewal only worsens infrastructure conditions across the city and costs more down the road. At the same time, we still have to fund growth projects to meet the needs of a growing city.
We are doing ongoing work to right-size our inventory and adjusting policies that may be driving-up the costs of projects.
Let me know any specific questions you have about the capital budget or on the specifics of what was funded in this current budget cycle.
