2025 Updates
Strong finances are the foundation that allows the City to deliver the services and infrastructure Edmontonians need now, and as we grow by a million more people in the coming decades. We protect this foundation by carefully managing our revenues and expenses, having robust financial processes in place, and understanding and taking action on what could threaten it.
A fiscal gap refers to when the City’s ability to raise revenue (what we expect to take in) continuously falls short of its expenditure needs. Though the City has strong financial practices and is in stable financial condition, it is facing significant fiscal pressures, which means that the City’s ability to generate revenues (the money we expect to take in) has been falling short of spending needs. This is referred to as a fiscal gap. There is no single solution that can fix the fiscal gap, but the City is taking action to help close it. This includes increasing revenues, reducing spending and advocating for different fiscal arrangements.
On March 5, 2025, Administration presented a plan to City Council to narrow the fiscal gap and protect its long-term financial health. It includes:
- Continuing work to prioritize services based on what’s most important to maintaining Edmontonians’ quality of life and evaluating and prioritizing capital construction needs.
- Growing our revenues, including growing the non-residential tax base, looking at non-tax revenues like user fees to make sure they’re keeping pace with the cost of service delivery, and continuing to advocate other orders of government for modernized revenue sources that consider the responsibilities and pressures of big cities today.
It’s taken time for the fiscal gap to develop, and it will take time and some tough decisions to manage it.
The City has gone through a series of intensive budget reduction and efficiency exercises over the past decade to keep tax increases as low as possible. It’s part of our normal processes to find cost savings and efficiencies. Since 2015, these efforts have resulted in a cumulative savings of $1.9 billion and reduced our required tax increases by 21.5%.
During the pandemic, planned tax increases of 2.6% were reduced to 1.3% in 2020, (0.3% in 2021 and 1.9% in 2022) to reduce the tax burden for Edmontonians who were facing financial hardships. To achieve no increase in 2021, we made $50 million in reductions, including program changes, efficiencies, staff reductions and temporary facility closures. In 2022, our 1.9% tax increase was the lowest among major Canadian municipalities. These low tax increases were necessary, but are not sustainable.
In this budget cycle (2023-2026), the OP 12 amendment reduced the City’s operating costs by $15 million a year from 2023-2026, which reduced our recommended annual tax increases by about 1%.
Through the fall budget deliberations, Council limited property tax increases by:
- Approving recommendations that included $18.5 million in savings, including $8.5 million in ongoing savings to limit the tax increase and $10 million in one-time savings to help replenish a key reserve, the Financial Stabilization Reserve.
- Accepting the Administration’s recommended $8.5 million in ongoing savings, including a lot of small changes including savings in contracts, materials and equipment, which helped minimize the impact on services. It also includes service changes, like slowing down the Heritage Program.
- Using the $8.0 million increase in the EPCOR dividend and the $9.7 million increase in franchise fee revenue to lower the tax levy.
- Using the LRT Reserve to offset the projected transit revenue shortfall for 2025 and 2026.
- Reducing the annual transfer from the operating budget to fund capital projects, known as Pay-As-You-Go, by $15.0 million.
At the 2025 municipal tax levy confirmation, Council reduced the tax increase by 0.4%. This is a result of changes in the provincial budget that partially restore Grants in Place of Taxes (GIPOT) payments. GIPOT is the program that provides municipalities a grant in place of property taxes for Government of Alberta properties (for example, the Alberta Legislature). GIPOT will increase from 50% to 75% in 2025, then 100% in 2026, which means the City will see an increase in revenue on an ongoing basis by $8.6 million in 2025 and another $8.2 million in 2026.
Some of the main budget challenges the City is managing right now include:
- Inflationary pressures: We all experienced a long period of high inflation in recent years. Inflation has slowed, but that just means that price growth has slowed. Price levels are still high. It’s costing us much more to deliver the same services for Edmontonians.
- Rapid population growth: Since 2001, our population has grown significantly. We’ve grown the most compared to other large Canadian cities, and in recent years, that rate of growth accelerated, reaching its highest level in 2023. It’s great that we have so many people moving here—we want to grow by a million more people in the coming decades—but we have to manage the budget impacts. We are experiencing a growing demand for our services and a growing need for new infrastructure. And while population growth adds to our revenues through property taxes, that growth doesn’t fully cover the City’s added costs.
- Changing service needs: Edmontonians are using services like transit differently, and more support is required to respond to encampments and extreme weather. This is affecting both our costs and our revenues.
While we tracked and planned for these pressures, they’re much bigger than what we forecast when we developed the 4-year budget in 2022, and we need to respond. It will take time to manage these challenges, but our fall budget adjustment recommendations will help to make meaningful progress on these challenges.
The City is facing both short-term and long-term budget challenges, and we need to make changes to keep our finances stable. The fiscal gap is complex and has taken time to develop. We’ve developed a plan and are starting to work on strategies to help narrow it.
In the short term, we are addressing structural budget issues where services are either costing more or not bringing in as much revenue as budgeted. We are also responding to the impacts of a long period of high inflation and rapid population growth, as well as the changing service needs of Edmontonians. The City made adjustments to the 2024 and 2025 budgets, prioritizing core services to respond to these challenges.
The long-term challenge is the gap that has developed between the City’s revenue-generating capacity and expenses.
The tax increases in recent years reflect what is needed to continue to deliver the services Edmontonians rely on in a financially sustainable way, given the challenges we face. Like many Edmontonians who are facing higher costs, the City has to make some tough choices. We have to increase our revenues, which are mostly limited to property taxes and user fees, and we have to reduce our spending. The City has implemented $1.9 billion in savings and efficiencies over the past 15 years, which reduces the flexibility in our budget to absorb new cost increases. We are working hard to find the best possible balance between keeping tax increases and user fees manageable and minimizing the impact on services and construction projects.