Council debates using cash for tax relief

But chief financial officer warns move may compound problems moving forward

One Edmonton councillor urged council Tuesday to consider using a record-high surplus to offer tax relief, but earned little more than a lecture from the chief financial officer.

“A one-per-cent (tax) decrease would be how much?” asked Coun. Mike Nickel, as council debated what to do with its record $64-million surplus, the highest in at least 10 years.

“About $14.7 million,” said chief financial officer Todd Burge, before warning Nickel a move like that just “compounds your problem in the next year.”

“I understand that, but people’s positions are dire as well,” said Nickel. “With an unemployment rate of 6.8 per cent, and a vacancy rate of 7.1 per cent. … It’s supposed to be a rainy-day fund.”

“The rainy day fund is not an appropriate term for it. It’s a risk management fund,” said Burge.

In the end, no final decisions were made Tuesday. The money will go into the financial stabilization fund as per council policy, but can still be withdrawn when council finalizes the budget in April.

Nickel hopes to make a motion for tax relief then.

Coun. Dave Loken said he’s also heard from citizens wondering how Calgary achieved a tax freeze this year when Edmonton is looking at a 2.85 per cent increase.

“(Calgary) ... balanced their budget by using money out of reserves,” said Burge.

“It’s one-time relief. You’re obligated to replace it.”

Nickel doesn’t have much support on council for tax relief.

“It’s great politics, I get it. I understand exactly why they did it in Calgary. … But it’s not good fiscal policy,” Mayor Don Iveson said after the meeting.

Using a surplus to lower taxes this year is really just forcing council to increase taxes the next, Iveson said. “That’s just pushing the burden off past the next election. I think this council has better discipline than that.”

Coun. Michael Oshry is also against using the surplus to lower taxes.

“It’s a minor, short-term gain. ... We’d have to pay it back with interest next year.”

With this year’s surplus, the financial stabilization fund will increase to $137 million, well over the minimum balance but still shy of the target: $166 million.

City manager Linda Cochrane said it’s intended to shelter the city budget against unexpected, onetime financial challenges.

Prior to Tuesday’s debate, several councillors suggested council could reconsider projects left unfunded during the fall budget debate, such as the Nuit Blanche art festival, Edmonton City as a Museum project and public art conservation.

They previously decided to spend $3.5 million of any surplus on affordable housing.

Any additional items will be debated when the budget comes back in April, so council can “weigh them all against each other rather than one-offing today,” Iveson said.

Council was told the surplus includes $26 million from the 2016 snow- and ice-clearing budget.

It also includes more than $13 million that administration is hoping to carry over into 2017 to allow certain projects to be finished. About $9 million of the surplus is from unfilled staff vacancies and $6 million is from reduced consulting costs from delayed projects.

The budget also saw a $3-million deficit from lower-than-expected attendance at recreation centres and facility rentals.

It was $3.5 million short from decreased transit revenue.

The surplus is worth about 2.5 per cent of the operating budget.