Freeway spending set to drive up debt

City on the hook for more than half of $1-billion Yellowhead Trail project

Turning Yellowhead Trail into a freeway will cost Edmonton residents $510 million, including a 1.76 per cent dedicated property tax increase.

That increase will be phased in over the next 10 years as Edmonton ramps up construction on the total $1-billion project, city officials said while releasing the fine details of the project Thursday.

The freeway has provincial and federal funding. But because those grants don’t cover land acquisition, splitting the tab three ways actually means Edmonton pays more than half.

“It’s just using a mortgage to fix a billion-dollar challenge,” said Mayor Don Iveson, defending the decision to go further into debt to pay for the infrastructure. “It’s spread out over a long period of time and it does deal with a significant congestion and traffic safety challenge that we have.”

Council is set to vote on the borrowing bill Tuesday.

Residents want this issue fixed, Iveson said. They’re saying “the Yellowhead is a decades-overdue investment. There’s no time like the present to get moving on it and the sooner we can do it, the better we’ll be able to take advantage of this construction climate.”

The increase in debt will leave Edmonton at about 60 per cent of the legal debt limit for municipalities set by the province, said chief financial officer Todd Burge: “We’ll still have plenty of debt room over time.”

BORROWING PLAN

The city typically borrows money as it’s needed, paying back loans over 20-year periods.

This project will not significantly reduce the debt room because previous LRT debt will start coming off the books in four years, said Burge.

Also, Edmonton is a fast-growing city. As the city’s revenue grows, so does the amount of debt it’s allowed to take on.

Edmonton had $3.3 billion in debt at the end of December.

Servicing the $510 million in additional debt will increase taxes by 0.24 per cent in 2018 and 0.32 per cent the following year. The total over 10 years is a 1.76 per cent increase. To put that in context, a 1.76 per cent increase on this year’s tax bill would be about $40 for the typical household, which is a $408,000 single-family home.

The Yellowhead Trail project is expected to create 6,000 jobs during construction, $500 million in wages and generate $100 million in federal and provincial income taxes, said Burge.

Iveson said the funding balance is not a surprise since federal and provincial governments normally won’t pay for buying land. He’s hoping some of the land is only needed on a temporary basis as construction lay-down areas. The properties could be sold again after the project is complete.

PROJECT DETAILS

The project involves a 25-kilometre stretch of road that currently has 10 interchanges, eight intersections with signals and several intersections without signals for private accessways. The goal is to make it free-flowing and improve safety at some of the existing interchanges.

It’s a dangerous goods route and the most heavily used truck route in Edmonton.

The project will go through a screening process to see if it’s a good candidate for a public-private partnership, according to a city report Thursday.

City officials will also seek fixedprice contracts to protect against cost escalation.

Adam Laughlin, head of infrastructure for the city, is scheduled to give a full presentation on the project Tuesday.