Homeowners feeling pinched despite recovery: economist
The city ’s economist says Edmonton can afford the tax increases proposed in its next budget, but said council should tread cautiously as residents are starting to “feel the pinch.”
City council heard Wednesday that although the city is entering a period of moderate growth, the broader economic improvements aren’t extending to its middleclass residents.
Economist John Rose told council that the proposed $79 tax increase for the average homeowner in 2019 by itself won’t be too much trouble for most people, but he said the combination of rising interest rates, elevated inflation and relatively high consumer debt levels is making it more difficult for the average household to make ends meet.
Unemployment is decreasing, but the job gains are largely in lower-earning positions. Meanwhile, people making an average income are not seeing increases, he said.
“With inflation running at 3.3 per cent, incomes flatlining, it’s going to be very difficult for the typical consumer to absorb additional costs,” Rose said, speaking outside council chambers following the presentation of the proposed 2019-2022 operating budget by administration.
Beginning later this month, councillors will debate what to fund and what to cut during deliberations for both day-to-day municipal spending, and a $4.3 billion budget for building and repairs. They’ll also decide if they want the city to take on more debt — increasing taxes further — to fund projects like Lewis Farms Recreation Centre and upgrades to the Terwillegar Drive Expressway.
The pressure on property taxpayers, and the lack of “consumer confidence” despite an overall improvement in economy, worries Ward 5 Coun. Sarah Hamilton.
“I lived through the American recession, and it was awful,” said Hamilton, who lived in the U.S. from 2009 to 2014, in an interview on Wednesday. “In the years after that, even though the government said, ‘ We’re in recovery, everything is fine,’ people didn’t feel it was fine.”
She said the experience has informed her perspective about what’s happening in Alberta, and she said people feeling like they can’t put down roots, or go out and spend money, has a big impact on the city.
During the council meeting Rose responded to Hamilton’s questions about what, if anything, can be done to increase consumer confidence, but he said it’s a factor largely out of the city’s hands: inflation, the Canadian dollar and federal and provincial spending pack a much bigger punch.
A particularly big unknown is what will happen following the provincial election in 2019. Both the governing NDP and the opposition United Conservative Party have been vague about plans for tackling the provincial deficit, which is a pressing concern, Rose said.
And if the province decides to deal with its deficit by making cuts, he said Edmonton will feel it “very quickly and very dramatically.”
During the budget presentation, council heard 27 per cent of Edmonton jobs are dependent on provincial spending, compared to just 2.6 per cent of local full-time jobs being funded by the city.
Hamilton said that means it’s important for the city to use every available opportunity to remind other levels of government what is at stake, and she said council needs to figure out a way to talk to residents about the tax increases in a “constructive” way while recognizing that the pressures they are feeling are real.
“It may not entirely be in our control, but we can understand it and empathize, and our role is to prepare the city to make that easier on citizens,” she said.
A public hearing for citizens to give feedback on the proposed budget will be held on Nov. 15.